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Economic recession slowing down: expert

Dr Le Xuan Nghia, Deputy Chairman of the National Finance Supervision Committee, said that the Government’s demand stimulus packages have brought the desired effects with economic recession slowing down.

Nghia said that “The Government has been implementing the measures to curb economic downturn in two sectors, the monetary policies which focuses on interest rate slashing, and the fiscal policy which focuses on public investment increase, tax payment delay and tax reduction.

To date, the interest rate subsidy program has been going smoothly. It is estimated that over VND 100 trillion has been disbursed under the program, plus the credit in February increased by 1.5% in comparison with the beginning of the year. These are the important signs showing that the economic recession has been slowing down.

Meanwhile, public investment packages have also been going well, especially the investment in rural infrastructure, schools, hospitals and low cost houses.”

Businesses still complain that they cannot access bank loans under the interest rate subsidy program. Do you think that the state management agencies need to adjust the loaning mechanism, expanding the subjects to the preferential loans in order to make more businesses accessible to the loans?

The Government and the State Bank of Vietnam have been gradually settling the problems. The regulations on disbursement for the loans under the interest rate subsidy program have been amended, which allows finance companies to provide interest rate-subsidized loans as well. Mining companies have also been listed as the subject to the loans.

I think that we need to add more enterprises in the construction industry into the list of subjects to the preferential loans. Currently, only executing companies can access the loans, while investors cannot. This will hinder the development of enterprises in the sector, which is believed to be capable to create a higher GDP.

Experts said that in the current context, it would be a great success for other industries to survive the difficulties, while the construction sector not only can survive, but also can develop and help recover the national economy.

I know some experts have warned that with the interest rate subsidy program, some businesses may get new loans with subsidized interest rates to pay old debts with higher interest rates (to date, this move has been prohibited as experts believe the behaviour can hide ‘problematic loans’ – reporter). However, I think that it is necessary to consider setting up a mechanism allowing businesses do this legally. This will help businesses get capital to maintain production and jobs for thousands of labourers.

When do you think Vietnam’s economy’s recession will bottom out? Will Vietnam be able to recover the national economy by relying on the domestic market, if the world’s economy remains in difficulties?

I think that the economic growth rate will be between 5-5.5% this year. It is possible that the economic recession will be curbed in Q3 which paves the way for the economy to bounce back earlier the next year. When the world’s economy recovers, Vietnam’s economy will be able to recover more rapidly as we have advantages in domestic demand, and Vietnam’s export products are cheap.

As people in the world have seen their income go down, governments in the world have encouraged importing cheap products, including ones from Vietnam. This really serves as the opportunity for Vietnam to push up exports in the time to come.

If the world’s economy still does not recover, Vietnam’s economy will recover more slowly.

What do you think Vietnamese businesses need to do now to prepare for the recovery of the national economy?

The measures to fight economic recession have had positive impacts on the economy, which shows that Vietnam’s economy is likely to recover sooner than previously forecast.

Opportunities can be found in every crisis. It is now the right time for Vietnamese businesses to renovate technologies as the technologies have become very cheaper.

The Government, I think, should also consider expanding the subjects eligible to get preferential loans. Businesses can get preferential loans not only for working capital, but also for fixed capital which allows businesses to renovate technologies.

Foreign enterprises now have big chances to renovate technologies with low loan interest rates. The medium and long term interest rates are between 4-4.5% per annum in the US, while the rate is 5% in Singapore. Meanwhile, in Vietnam, businesses bear the rate of 10% per annum.

Some experts have warned that demand stimulus packages would make the high inflation period return. What do you think about that?

In medium term, the demand stimulus measures will bring side effects, like the budget deficit increase, higher current account deficit on GDP, thus pressurizing the inflation of the next few years.

Experts have warned about the three risks, budget deficit, trade gap, and high inflation.

I think that the budget deficit can be settled within a short period when the national economy recovers. Trade deficit proves to be not a big problem. However, inflation would be really a risk. Loosened monetary and fiscal policies may bring inflation

However, the 5-7%, or even 10% inflation would be acceptable, and we need to accept risks in return for rescuing the national economy. I think the high inflation will not occur in 2009. It could be the risk for 2010. However, the Government has been aware of the risk and it has enough time to control the inflation in the medium term.